COMMISSIONER OF INCOME TAX Vs. ABHAY L KHATAU

JUDGEMENT

(1.) WE are concerned in these references under section 256(1) of the Income -tax Act, 1961, with the assessment years 1965 -66 and 1966 -67. The assessee, an individual, had transferred certain shares to his wife. In his assessment order, the Income -tax Officer brought to tax the sums of Rs. 11,700 for the assessment year 1965 -66 and Rs. 16,003 for the assessment year 1966 -67, received as dividend on these shares, applying section 64(iii) of the Income -tax Act, 1961. The Income -tax Officer observed that the assessee was entitled to rebate under section 85 of the said Act upon, inter alia, the said dividends, and assessed the assessee's income accordingly.

(2.) THE Commissioner of Income -tax issued to the assessee a notice to show cause why the Income -tax Officer should not be directed to withdraw the rebate under section 85 of the Income -tax Act, 1961, on the basis that could not be considered to be dividends in his hands. After hearing the assessee, the Commissioner of Income -tax concluded that the requirements of section 85 had not been fulfilled and directed the Income -tax Officer to withdraw the rebate allowed to the assessee under section 85 on the said dividends.

(3.) ARISING out of the order of the Tribunal, the following question is raised at the instance of the Revenue :